Read our latest industry news where Art Olsen, INFINIT's Senior Business Consultant, processed all the data in the Wells Fargo overdraft fee court case.
Written by: Aaron Smith
Published by: CNNMoney
NEW YORK (CNNMoney.com) — Wells Fargo was ordered to pay more than $200
million in restitution to California customers for manipulating and multiplying
overdraft fees, a federal judge has ruled.
U.S. District Court Judge William Alsup of Northern California, in his
90-page ruling Tuesday, said Wells Fargo used "a bookkeeping device" that turned
one instance of overdrawing an account into as many as 10, allowing the bank to
multiply the number of fees it could collect from a single mistake.
"The bank went to considerable effort to hide these manipulations while
constructing a facade of phony disclosure," he said.
The ruling said Wells Fargo (WFC,
500) must pay $203 million in restitution to California customers for its
liberal use of $35 overdraft fees. This is a fraction of the $1.8 billion in
overdraft fees that the bank collected in California from 2005 to 2007,
according to the court.
"The revenue generated from these fees has been massive," wrote the
The ruling concluded a two-week bench trial that ended May 7.
Wells Fargo spokeswoman Richele Messick said that her company was
"disappointed" with the judge's ruling.
"We don't believe it's in line with the facts of the case and we plan to
appeal," she said.
Paul Miller, analyst for FBR Capital Markets, said that Wells Fargo's
handling of the overdraft fees was "always a questionable practice" that has
been "going on for years."
But he said that in the future, bank fees are going to become "more up front
than back door," especially in the wake of financial reform.
"I think with financial reform in general, a lot of
these practices are going to change anyway," he said. "The government is going
to take a really hard look at this stuff."